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Richard Arnholt

Richard Arnholt advises companies, large and small, on the complex rules and regulations applicable to grants and contracts from federal and state governmental entities. In an era of increased budgetary pressures for contractors, Richard focuses his practice on providing practical business and legal guidance to help clients efficiently navigate the minefield of government procurement and grant regulations.

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On August 26, 2015, the Department of Defense (“DoD”) issued an interim rule, effective immediately, that revises network security requirements applicable to DoD contractors and introduces new cloud computing provision that reflect current DoD policy. The interim rule, which implements sections of the FY13 and FY15 National Defense Authorization Acts, comes on the heels of the massive breach of Office of Personnel Management systems that compromised the personal data of more than 21 million federal employees. The new and revised requirements apply to cyber incidents on unclassified information systems – breaches of classified systems will continue to be reported in accordance with the National Industrial Security Program Operating Manual. The interim rule also implements DoD policies and procedures applicable to the procurement of contracting for cloud computing services.

The rule includes five contract clauses relevant to contractors and subcontractors providing cloud computing to DoD or who are handling controlled unclassified DoD information on their systems. All five apply to commercial item contracts.Continue Reading DoD Contractors Beware – New Network Penetration Reporting and Cloud Services Requirements Are Here

Our government contracts team successfully defended an award to CWU, Inc. of a $143 million task order by the Department of the Army, U.S. Army Intelligence and Security Command (INSCOM) for linguist support services. The task order was issued under the Defense Language Interpretation and Translation Enterprise (DLITE) contract, which is a five-year, $9.7 billion Multi-Award Task Order Contract that provides interpretation and translation services DOD-wide at a variety of security levels.

The cost-plus-fixed-fee task order, which has a one-year base period and two one-year options, is for linguist, interpretation and translation support services to intelligence operations in order to meet ongoing mission requirements for the U.S. Central Command (CENTCOM), European Command (EUCOM) and African Command (AFRICOM). The Army first selected CWU for award in November 2014. SIG, the incumbent contractor, protested that award and the agency took corrective action in December 2014. INSCOM affirmed its original award decision in March 2015 and SIG again protested.Continue Reading Bass, Berry & Sims Defends Award in GAO Bid Protest of $143 Million Task Order

According to recent statistics, the numbers of suspension and debarment actions against companies and individuals has risen dramatically during the last few years. As cited in a recent article I authored for Law360, “[b]etween fiscal year 2009 and FY 2013, the number of suspensions government wide increased from 417 to 887, proposed debarments increased from…

Last month, the Sixth Circuit affirmed sanctions imposed by a district court against a relator and his counsel for bringing a frivolous False Claims Act (FCA) action. The ruling in United States ex rel. Jacobs v. Lambda Research, Inc., No. 14-3705, 2015 WL 1948247 (6th Cir. May 1, 2015) is a positive development for companies that have faced an increase in FCA actions in recent years. It also illustrates the use of a sanctions provision that is specific to FCA claims.

Lambda Research is a small business that contracts with the United States Navy to strengthen the metal components of warplanes. Terry Jacobs, the individual who brought the FCA case, worked for Lambda for two years before he left the company to become vice president of a competitor business, Ecoroll Corporation.

Lambda thereafter sued Jacobs in state court, alleging that Jacobs stole Lambda’s trade secrets and gave them to Ecoroll. A jury found Jacobs liable and awarded Lambda $8 million in damages. Additionally, the state court found that Jacobs misappropriated trade secrets willfully, and ordered him to pay Lambda $1.4 million in attorney’s fees.Continue Reading Relators Beware – Sanctions Upheld for “Vexatious” False Claims Act Suit

Employee severance packages and settlement agreements often include a broad waiver of any claims, known or an unknown, which an employee may have against the company.  Although such broad pre-filing releases are highly recommended, companies doing business with the government should be cautioned that these waivers do not always protect against False Claims Act (“FCA”) litigation.  A line of federal cases has established that these so-called “pre-filing releases” are sometimes unenforceable against suits filed by whistleblowers, or qui tam actions, for public policy reasons.

Pre-filing releases bar qui tam actions only if the government was already aware of the fraudulent conduct that forms the basis for the employee’s allegations.  The Ninth Circuit in an early case held that enforcing such a waiver where the government was not aware of the fraud until the filing of a qui tam complaint would be against public policy.  U.S. ex rel. Green v. Northrop Corp., 59 F.3d 953 (9th Cir. 1995).  The court noted that the FCA’s qui tam provisions are meant to incentivize whistleblowers to come forward with information that the government would not otherwise be able to obtain.  Thus, when the government first learns about alleged fraud from a whistleblower complaint, the pre-filing release will not be enforced.  This view is shared by the Fourth and Tenth Circuits.  See U.S. ex rel. Radcliffe v. Perdue Pharma, L.P., 600 F.3d 319 (4th Cir. 2010); U.S. ex rel. Ritchie v. Lockheed Martin Corp., 558 F.3d 1161 (10th Cir. 2009).Continue Reading Enforceability of Employee Releases on Qui Tam Actions

A Maryland-based construction company required to pay “prevailing wages” under a Federal government contract recently settled for $400,000 claims that it had violated the False Claims Act (“FCA”) by failing to properly supervise lower-level contractors in the payment of prevailing wages to their workers. The case serves as a reminder that government contractors who fail to ensure compliance with wage requirements – whether under the Davis-Bacon Act (“DBA”), Service Contract Act (“SCA”), or Walsh-Healy Public Contracts Act (“PCA”) – can face significant liability. It also highlights the ongoing expansion of the federal government’s battle against procurement fraud.

Many Government Contractors Are Subject to a Prevailing Wage Rate Requirement

Most government contractors who provide services; do construction, alteration or repair work on public buildings; or manufacture certain goods are subject to a prevailing wage requirement. Those requirements include geographically determined wage rates and fringe benefit rates set by the Administrator of the Wage and Hour Division of the U.S. Department of Labor (“DOL”) for various labor classifications. Where a government contract incorporates such a requirement, government contractors, including their subcontractors, are required to pay wages at least as high as the prevailing wage rates.Continue Reading The Growing Risks of Non-Compliance with Wage Rate Determinations

Billions of dollars every year are spent in the United States on “Federal health care programs,”¹ including Medicare, Medicaid and Tricare, among others.² For individuals and entities in the healthcare industry, reimbursement from these programs is a vital component of their business. However, many are unfamiliar with the authorities under which the Department of Health and Human Services (“HHS”) excludes individuals and entities from participation in Federal health care programs, nor are they familiar with the nuances of the exclusion program. Understanding the types of violations that can trigger exclusion, as well as the process for responding to a proposed exclusion, is necessary for parties receiving reimbursement from Federal health care programs to ensure their compliance program is adequate and to understand the steps that must be taken to mitigate the impact of a proposed exclusion.

Introduction

Pursuant to sections §1128 and §1156 of the Social Security Act (the “Act”), HHS, specifically the Office of the Inspector General (“OIG”), has the authority to exclude individuals and entities from Federal health care programs. Exclusion means that items and services furnished, ordered or prescribed by the excluded individual or entity are not reimbursable under Medicare, Medicaid and all other Federal health care programs. While exclusion by HHS is similar in some respects to suspension and debarment, it does not bar excluded parties from being awarded federal contracts and grants. Once a party is excluded from participation they are added to the List of Excluded Individuals/Entities (“LEIE”) maintained by HHS and the exclusion appears on the System for Award Management (“SAM”). Any healthcare entity participating in Federal health care programs that hires or contracts with an individual or entity on the LEIE may be subject to civil monetary penalties, so it is important that they establish processes and procedures to routinely (monthly is recommended) check the LEIE to ensure new hires, current employees, and potential contractors or subcontractors are not excluded.Continue Reading Exclusions by the Department of Health and Human Services – Authorities and Procedures

On March 2, 2015, new anti-human trafficking rules applicable to government contractors went into effect.  (New requirements applicable to Department of Defense (DoD) contractors, available here, went into effect on January 29, 2015.)  While government contracts have been subject to anti-human trafficking provisions for some time, these revised requirements, which implement Executive Order 13627 and parts of the National Defense Authorization Act for Fiscal Year 2013, include a new certification provision, mandatory reporting obligations, involvement of suspending and debarring officials in the review of reported violations, full cooperation with agency investigations, and publication of violations on FAPIIS, among other changes.

It is important that contractors recognize that all new contracts are subject to many of these new requirements, available here, and ID/IQ contracts will be modified to include them in future orders.  If they have not already done so, contractors should promptly determine which of the new requirements they are subject to and, if necessary, revise compliance policies and procedures accordingly.Continue Reading Contractor Alert: New Anti-Human Trafficking Rule

From the Bass, Berry & Sims Blog Network
From the Bass, Berry & Sims Blog Network

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